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So why are implant list prices so high, and rising by more than 5 percent a year? In the United States, nearly all hip and knee implants — sterilized pieces of tooled metal, plastic or ceramics — are made by five companies, which some economists describe as a cartel. Manufacturers tweak old models and patent the changes as new products, with ever-bigger price tags.

Generic or foreign-made joint implants have been kept out of the United States by trade policy, patents and an expensive Food and Drug Administration approval process that deters start-ups from entering the market. The “companies defend this turf ferociously,” said Dr. Peter M. Cram, a physician at the University of Iowa medical school who studies the costs of health care.

Though the five companies make similar models, each cultivates intense brand loyalty through financial ties to surgeons and the use of a different tool kit and operating system for the installation of its products; orthopedists typically stay with the system they learned on. The thousands of hospitals and clinics that purchase implants try to bargain for deep discounts from manufacturers, but they have limited leverage since each buys a relatively small quantity from any one company.

In addition, device makers typically require doctors’ groups and hospitals to sign nondisclosure agreements about prices, which means institutions do not know what their competitors are paying. This secrecy erodes bargaining power and has allowed a small industry of profit-taking middlemen to flourish: joint implant purchasing consultants, implant billing companies, joint brokers. There are as many as 13 layers of vendors between the physician and the patient for a hip replacement, according to Kate Willhite, a former executive director of the Manitowoc Surgery Center in Wisconsin. http://www.nytimes.com/2013/08/04/health/for-medical-tourists-simple-math.html?_r=0